Tuesday, May 17, 2016

The May Market Report - Sales are Up, Even With Last Year, But Pendings are Starting to Slow

new listing, 3 rental units, wow!

walk to town, under $1mm

high-style, new wow price


  private riverfront retreat

  new listing, top-flight condo

285 Havilland Rd $1.389
new listing, gone, already sold it!

  the best condo at Canaan Close

privacy, a gated community

2 acres, 5 beds, pool, new price

great value, pristine

  1094 Ponus Ridge $2.08
reduced 20%, wow price!!!

The Willis Mills House, 1956
gone, two offers. rented it!!
(another modern coming on this week, email for pictures)

shingle style and great pool

227 Lambert Road  $4.780
a romantic estate, new price!

gone, rented both long-term

gone, rented both long-term

video tour by Susan Engel

How's the market? Everybody is asking. First, some data.

20 houses were sold in April, up from 15 and the most in April since 2007. It allowed us to catch up to where we were last year. Its been a late Spring market.

After 4 months we have 51 sales versus 49. We are not in a recession. This is solid sales volume. 

The average sale price decreased 14% since this time last year, down from $2.228 million to $1.908 million. This is a result of more sales at the low end of the market. 

We have had zero sales over $4 million this year. Zero. That part of the market is struggling. Last year we posted 3 super-sales in the first 4 months. Sales at $11 .7 million and $5.1 million were attributed to large sub-dividable lots while the $4.2 million sale was a beautiful newer home on 4 acres. Instead, this year we've seen 7 sales between $3.0 and $3.75 million, up from 2 at this time last year.

New Canaan single family home inventory has increased 37% from 260 to 332. As of the writing of this market report two weeks later that total has climbed to 347. We had predicted a June peak of 370 in our February Market Report and we stand by the prediction because pending sales are down 41% from where they were last year year. Instead of looking forward to 61 sales in the next two months we are on track to sell only 36.

Let's break it down...
  • Fairfield County Sales: The number of sales is up 10% across the county with four out of six town posting big gains. Wilton is flat for the year with 43 sales and New Canaan is only up 4.1%. Prices are flat everywhere with no town posting a change of more than 5.6%. 
  • Fairfield County Inventory is up only 4.6% with the only large gains being posted in New Canaan (+21%) and Wilton (13%) While a 4.6% increase does not sound alarming, it is an 8.6% increase in inventory over 2 years which translates to nearly 500 houses. Expect this increase in inventory to have a lagging effect.
  • New Canaan Pending Sales: is our best forward-looking indicator. Looking at the first quarter we saw a 21% decrease in Pending Sales from 43 to 34. That number should be rising to 61. Looking only at the month of April we saw a 37% decline in Pendings which brought us to a four month decline of 41%. This is concerning and something to watch. 
Below is a link to the New Canaan May Market Report. If you would like to discuss the report, or if you have any other questions, feel free to contact us at 203-247-4700 (JE) or 203-247-5999 (SE) 

Best regards,          

John and Susan

The inventory is spread across all segments of the market, geographically distributed across all prices, in every style.

20 sales this month, and 51 for the year.  Better than 2015
We will see sales volume peaking at normal levels of $60-$70 million per month in June and July again.

Is it surprising that we see normal levels: 120-300?
Five years ago we ranged from 141 to 289 days.

The absorption rate shows normal house sales rates (243 per year) but an excessive number of listings. Five years ago the graph peaked twice at 15 months.

Around 94% is normal. The divergence indicates a buyer's market where seller's are chasing offers.

Susan admires the wallpaper at the Noyes-Graff House

Market Report Notes for May 2016

The Noyes-Graff House of 1966, coming on the market tomorrow at $1.78 million

We are getting a lot of panicked questions about the market this month because of the unusually high inventory levels. Why so many houses? Are there any buyers out there? What do I have to do to sell my house? Why isn't anybody looking? How long is this going to take.

Susan and I have 15-20 listings on the market and we do open houses every weekend. We are in the biggest, most productive office in town and we listen carefully to the feedback each week from some of the best agents in town, both in and outside of our office. I have some answers to those questions.

There are three pools of buyers. This has not changed in the last ten years. They represent each of the thirds of the market. They are looking for different things and they behave differently. Do not expect to use one marketing strategy to reach all of these buyers equally.

The local buyer represents one third of all sales in New Canaan. This is primarily empty-nesters downsizing, small families getting bigger, big families getting smaller, and sometimes divorce. For the most part this third of the market is moving into town. They are downsizing into the 600 condominiums in the New Canaan market and most of those are within one mile of town. They are downsizing into smaller homes and smaller properties because their kids have gone off to school and they want to begin traveling, want to maintain less house and less yard. This group is a big reason for the interest in houses close to town.  The way we reach these people is through OPEN HOUSES, through the brokerage community of 400 agents in New Canaan, using our storefront windows, the New Canaan Advertiser and the NewCanaanite.com.  We are meeting many, many local buyers and prospects at our weekend open-houses. In fact, 50% of the traffic at some weekend open houses are neighbors and New Canaan residents. Some are looking for themselves, anticipating a job change, children leaving for school, or the needs of an elderly relative. I think that it is this group that is bidding up houses on Church Street, Harrison Avenue, South Avenue and other downtown neighborhoods because they put a disproportionate value on location over square footage and land. The local buyer (and Darien) is driving the condo market, the downtown trend market. The only reason the condo market is not stronger is because condo sales are often dependent on the prior sale of a single-family house. When those houses take a year to sell it affects both the local buying psychology and the condo market.

Some call this the trade-up market. This is a group of buyers who already have an awareness of New Canaan. They live in Stamford, Wilton, Westport, Weston, Norwalk, Rowayton, Fairfield and sometimes Westchester who are looking for the combination of low taxes, good schools and a relatively fast commute. Both sets of my grandparents lived in Stamford and they called New Canaan "fancy". My mother's parents moved here from Shippan Point in Stamford and moved to a house on 4 acres with a pond and a barn and a pool on North Wilton Road. This is the group that are looking in the 4 acre zone. They love the value they are seeing. Big yards and big houses are suddenly on sale in New Canaan. The low taxes are key since New Canaan is at a 15.99 mil rate and those towns all have mil rates at least ten points higher. You can move from those towns, pay a little more for your house but pay less in taxes. When residents in the surrounding towns realize they can shorten their commute, pay lower taxes, and get a bigger house they come out and look at our OPEN HOUSES.

This is New York. London. Miami. California. This is entirely, entirely, entirely an Internet-based market. Everybody who is not local is relying heavily on Internet portals to evaluate the market. It is said that the average buyer in this group spends 6 months looking at listings online before they engage an agent and start going to houses. And, the most important three things you can do for listings that are going to sell to the DISTANT third of buyers is to take great photographs. It is more important to launch a listing with great photographs than it is to launch it on-time. If you don't have the photos that are going to provoke people into making an appointment, then you are not ready to list.  Some of the profiles of recent calls in this category:
- I am looking at New Canaan because the Hudson Valley is too far from Manhattan.
- I am looking at the $2mm price point in New Canaan because that it costs to enlarge or improve upon my apartment in Manhattan.
- I want a weekend home and the Hamptons are too far away. So is Nantucket. Does everybody in New Canaan live there full time and will we be the only ones?

What does this mean for real estate values in New Canaan and the current malaise about high inventory?

First, the market is going to go sideways. The underlying reasons for moving to New Canaan are still in place: Low taxes, a great quality of life, proximity to Manhattan, great schools are all great draws for young families, old families, non-traditional families, couples, empty nesters, children, teens, etc. As long as New Canaan provides great value we will continue to see demand for the inventory. Demand has not diminished in the last few years and we don't see that changing.

Second, there is going to continue to be price pressure on homes as long as we have these inventory levels. Many of the towns around us have already experienced a correction. Wilton is currently selling at a 40% discount to New Canaan and that is a change from the days of perhaps a 25% or 30% discount. Do New Canaan prices have to come down another 10% before we are competitive with the surrounding towns? Some people think so. When you compare New Canaan to Darien and Greenwich, two of our historic rivals, and you realize that New Canaan prices are equal to similar houses in both of those towns you realize that we not only have competition from within, but we have competition from similar outstanding LOW-TAX towns. 

Third, we need to make adjustments in our zoning laws that anticipate the changing housing demands. As a town we are looking for a balance of many different types of resident. We don't want to be all about schools, or all about seniors, or all about large families. We need a balance in order to properly fund great schools, recruit volunteers for our many service organizations, support the arts and cultural organizations, and support a diverse and vibrant downtown comprised of a great variety of shops and restaurants. If we were only about great schools and that is the only kind of person who moved in we would quickly find ourselves in an imbalance. We need young professionals, seniors and everything in between. Unfortunately our housing stock is out of balance with demand. Developers have built an abundance of $2.5+ million dollar houses which offer large yards, big garages, and target large families. Zoning laws do not allow the developer to build two small houses on one lot, or five small apartments on two lots. Opportunities to build condominiums are as scarce as hens teeth.  When we adjust our zoning laws to anticipate a greater diversity of housing, in keeping with our Plan of Conservation and Development, then the free market will respond and small houses will be built, they will sell, and we will improve